The business secretary has asked officials to monitor the proposed £927 million takeover of a listed British respiratory drugs company by tobacco giant Philip Morris International after concerns were raised with government about the deal.
Kwasi Kwarteng is understood to be working with officials to better understand the plans Philip Morris, the maker of Marlboro cigarettes, has for Vectura, the FTSE 250 company developing inhaled treatments for respiratory diseases, including Covid-19.
There is thought to be unease in government that a tobacco company selling products that cause lung diseases is planning to buy another that is developing therapies to treat some of those conditions.
The 150p-per-share all-cash takeover caught the City by surprise when it was announced on Friday and has sparked a growing backlash.
Anti-smoking groups have criticised the deal, including the Tobacco Control Research Group at the University of Bath, which is the research partner in STOP, a global tobacco industry watchdog, Cancer Research UK and Action on Smoking and Health (Ash).
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Jon Ashworth, Labour’s shadow health secretary, and Ed Miliband, the shadow business secretary, wrote to Kwarteng and Sajid Javid, the health secretary, over the weekend, urging the government to intervene.
They have asked ministers to publicly scrutinise Philip Morris’s intentions, to listen to medical research charities “horrified” at the deal and to “work to ensure the future of this vital company is not in any way at risk”.
The letter presses ministers to use news powers under the Enterprise Act 2002 “to intervene in mergers and acquisitions to mitigate the effects of public health emergencies”.
“Vectura must be protected. Its work in developing drugs for respiratory conditions makes it an important firm in helping to tackle the Covid-19 pandemic, and on this basis there are clear grounds to block this deal,” they wrote.
However, officials are understood to think that the scope for intervention is limited on public health emergency grounds, including under market share requirements, and to believe that Britain has a strong respiratory product development industry.
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Philip Morris’s bid topped a 136p per share offer last month from Carlyle, the private equity firm, which Vectura’s board had recommended to shareholders. Carlyle has said it is considering its options.
Vectura is based in Chippenham, Wiltshire, and traces its roots to scientists at the University of Bath.
The company generates royalty revenues from drug patents that it has licensed to other companies, including for treatments used for chronic obstructive pulmonary disease, a smoking-related illness.
The group also works with other companies to help them develop devices and formulations for drugs that are delivered for inhalation, including to treat lung cancer.
The planned takeover means that Philip Morris stands to make money both from cigarettes and treatments for diseases that cigarettes cause.
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Philip Morris, listed in the United States, is seeking to diversify amid increasing regulatory clampdowns on the industry and awareness among consumers of the risks of smoking
It is looking to generate at least $1 billion in annual revenues by 2025 from products “beyond tobacco and nicotine”.
Jacek Olczak, Philip Morris’s chief executive, wrote on Friday to reassure Vectura’s employees, acknowledging “it may come as a surprise to many of you that PMI is evolving into a broader healthcare and wellness company”.
Philip Morris has said it plans for Vectura to become “an autonomous business unit, forming the backbone of our inhaled therapeutic business”. It has also vowed to introduce employee incentive plans “in keeping with private equity ownership” and has made pledges over jobs and sites as part of its agreed takeover of Vectura.
A spokesman for the Department for Business, Energy and Industrial Strategy said: “While this is primarily a commercial matter for the parties concerned, the government is monitoring the situation closely.”
